The next big thing for investors

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The Western Australia market is bouncing back from record lows, thanks to dipping vacancy rates and significant population growth.

According to Craig Gemmill, managing director at Gemmill Homes, one important factor that contributes to the brighter outlook of the state is the sharp decline in vacancy rates. In July 2017, vacancy topped out at 7.3%.

The stabilisation has been followed by four consecutive quarterly dips, and the Real Estate Institute of Western Australia revealed that the vacancy rate has fallen to 3.9%, marking a level last recorded in 2015.

Gemmill also said that it’s a great time for an investor to enter the market given the fact that conditions are swinging back in favour of landlords.

“Investors need at least 5% returns. The average now is around 5.5%,” he said. “When you claim 2% depreciation, that leaves a 7% return. That’s before investors have even claimed back their borrowing costs. So, in this market where interest rates are low, you can get a great return of investment. We’re going into an upswing in the cycle and it’s a great time to invest in the market.”

The increased population was the biggest change in WA’s outlook. After a 60,000-person drop in 2015, WA annual population growth is currently rebounding, with repeated increases in recent years.

CBRE figures showed that the state saw a 21,000-person net increase alone in the past year. Perth and Peel region’s population, which was around 1.65 million in 2010, is expected to exceed 2.2 million residents by 2031.

“This is the first step in the recovery of Western Australia,” Gemmill said. “Existing housing stock get soaked up. That affects supply and people then go to the next level of pricing or they build. It will really stimulate the market.”

Michael Valetta, CBRE director of residential valuations, shared the positive sentiment, noting the recent data that reflect clear growth for WA.

“An increase in population growth and decrease in vacancy rates present real opportunities for the real estate market,” Valetta said. 

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